(Washington) Credit rating agency Fitch downgraded Ukraine’s long-term debt rating by one notch on Friday after the Russian invasion, and Moody’s launched a review of the rating, threatening Ukraine and the Russia of the same fate.
Posted yesterday at 6:11 p.m.
“Russia’s military invasion has led to heightened risks to Ukraine’s external and public finances, financial stability and political stability,” Fitch said in a statement, also referring to “uncertainty about the ultimate goals of Russia, the duration, extent and intensity of the conflict, and its consequences”.
However, no outlook is given, which reflects a risk of non-reimbursement of the debt by an issuer whose quality is considered mediocre, it is specified.
“The invasion represents a severe negative shock to a wide range of key credit metrics,” the agency said.
It is stated that “Until now, Ukraine has had a credible macroeconomic policy framework […]a history of multilateral support, favorable human development indicators, a net external creditor position of 9% of GDP, and low public debt”.
But while “Ukraine has quite low external liquidity compared to sovereign external debt service of $4.3 billion in 2022, […] the expected capital outflows will further weaken its external financing position”.
Furthermore, “the shock to domestic confidence is expected to have a severe impact on economic activity and the currency, fueling inflationary pressures and macroeconomic volatility”, especially since “public finances are expected to suffer from higher military spending and (of) the possibility of refinancing domestic debt (which) will be severely limited”.
The rating agency is also concerned about the “high likelihood of a prolonged period of political instability, with regime change as President Putin’s likely objective, creating heightened political uncertainty and potentially weakening the capacity of the government.” ‘Ukraine to repay its debt’.
Moody’s, another rating agency, for its part warned Friday evening that it was going to launch a review to potentially lower the ratings it gives to the debts of Russia and Ukraine.
The military maneuvers “represent a further increase in the geopolitical risks already identified by Moody’s, which are now accompanied by additional and more severe sanctions against Russia”, details the agency in a press release.